Government had no choice but to dissolve Resolution Life Assurance Company Limited (ResLife), the court-sanctioned successor of CLICO, claims Minister of Finance Ryan Straughn.
Straughn told a town hall meeting at the Lloyd Erskine Sandiford Centre last night that contrary to what some financial pundits have argued, the decision to close the company was not a matter of trying to find the easiest way out and that all options were considered.
According to the Minister, the closure was the only option that ensured the investors got back some return on their investment without burdening the taxpayers with a private debt for generations to come.
Straughn said: “All of the claims from persons in Barbados and potentially those in the Eastern Caribbean, significantly exceeded the money or assets available to balance that liability. As a result, the previous government would have issued $600 million in debt to plug that hole.
“The reality is that as we came to office and as we restructured the debt, the existing burden of financing that debt so that the company can remain solvent did not make sense.
“If the company on its own could not manage its liabilities, the Government itself, given our debt profile up until a year ago, was also insolvent.
“Therefore, it was impossible for the Government to continue maintaining payments under that arrangement and at the same time continue to put money into the company to keep it going.”
The Finance Minister argued that not only was the structure of the company unsound but it threatened to derail progress of the Government’s economic restructuring programme, BERT.
“Many of you were promised that you would be paid, and the reality is that the inability of the company to pay you as promised suggested that the structure and the nature of it did not add up.
“So, we took a long hard look at what we were doing in the context of the total restructuring of Barbados’ debt and what Government was doing with respect to public financing.
“The reality is that under the Barbados Economic Recovery and Transformation (BERT) plan, we have committed to reducing our debt to GDP to 60 percent by 2033 and this debt that would have been issued to Resolution Life formed part of that,” The minister told the audience.
In Straughn’s estimation, given that policyholders had waited ten years for a definitive solution to the CLICO fiasco, it was unfair to leave these persons clinging only to hope. He argued therefore that it was kinder to devise a payout structure by which these policyholders and investors would be allowed to move on with their lives.
He said: “I would imagine that after 10 years, most persons owed by the company would feel much more relieved to be able to make their own plans going forward rather than hoping that this company would mature to the point where it is actually generating new business.
“So it is our considered view that given Government’s fiscal circumstances at the moment and the lack of confidence in the company to take on new business, the only logical conclusion would be to wind the company up and make payments in a manner that allow these persons to manage their affairs.”
